A property requires huge investment and thus there are multiple options to buy a property then give the price of property to builder/seller and take the keys and possession of property. The names of these plans vary slightly from one property to another but the crux of the scheme remains the same. In all of these options, one needs to go through clearances from state government and local Municipal Corporation either individually or via the builder/seller. One may get home loan up to 80% of the declared value of the property (residential), and upon fulfillment of bank’s terms and conditions and approval.
Under Construction Property
- Construction Linked Plan (CLP) – In this plan, the buyer needs to pay cost of the property on different milestones of construction of the property. For example buyer needs to pay 10% on the laying foundation, 10% on completion of 1st floor of the building, 10% on second floor of the building, EDC on completion of periphery of building etc. The buyer makes the final payment some time before builder offers possession of property to buyer.
- Price Linked Plan (PLP) or Flexi Payment Plan – In this plan, the buyer needs to make substantial amount of payment to builder towards the start of construction and then do not need to make any payment until the offer of possession is given to buyer. For example builder may ask for 10% of the cost of property as the booking amount, 15% of the cost within 30 days and 25% within 3 months. Thereafter, buyer needs to make payment when builder offers the property to buyer for possession.
- Subvention Scheme – In this scheme a buyer buys a property in CLP or PLP (see above) and takes a home loan. However, the difference is that builder pays the interest payment of the loan to bank or to the buyer for certain number of years or until builder offers property for possession, and up to certain interest or no limit. Most of the time, builder escalates the cost of property in this scheme to account for the interest payment it will make for the buyer. Read more about this scheme in Subvention Scheme – Benefits and Caution.
- Down Payment – This is the easiest plan to execute and builders generally give good discount when making payment up front for a property that is not ready for possession. However, a buyer is at great risk when choosing this option.
Ready to move-in property
- Down Payment – When buyer buys a property for another property owner then that dealing is called resale property. Resale of property generally involves two components – black (aka colored, undeclared) and white (declared value). If property has been newly constructed or there has not been much price escalation of the price of property then black component is low. On the other hand when a property commands substantial premium, black component can be substantial (it can be more than 50% of the market value of property). A buyer may get home loan only on white component of price of property.
- Installment Scheme Offered by Seller – In old times, when there were less buyers of property and the banks were not so readily giving home loans, the seller would offer to sell the property in installments. The buyer would need to make regular payments just as one needs to pay to bank.
The post Construction Linked Plan or Flexi Payment Plan – Which Home Construction Payment Plan to take explains the calculation of cost involved in these plans. One should be aware of various plans to buy a property so that one may make an informed decision to buy. Chime in the comments if I missed on any plan.